Xiaomi India To Streamline Operations And Reduces Headcount to Below 1000 To Counter Market Challenges

The restructuring efforts at Xiaomi India have led to a shift in decision-making authority to the Chinese parent company, diminishing the autonomy of the local leadership team. Employees claim that the company has been gradually reducing its workforce since the start of the year. Xiaomi India, however, asserts that the headcount decisions are primarily driven by business outlook and that the local Indian leadership remains empowered. The company maintains that it continues to hire as required.

Sources reveal that earlier this year, the leadership team was encouraged to assign certain members of their teams to a performance improvement plan (PIP). This move facilitated the subsequent dismissal of employees based on performance grounds. These layoffs coincide with internal structural changes within the company as the Chinese parent company increasingly makes decisions. Employees believe this decision-making authority change has contributed to Xiaomi’s declining market share.

Xiaomi India’s reduced market share is attributed to weak demand in the sub-Rs 10,000 segments, where the company had previously dominated. Shipments in this segment declined by 44%, which is the largest drop the brand has ever recorded.

In the first quarter of 2023, Xiaomi India’s shipments fell to 5 million from 7-8 million a year ago, causing the company to slip to the third position in the Indian smartphone market, behind Samsung and Vivo. Counterpoint Research predicts a challenging year for Xiaomi India, with a significant year-on-year decline in shipments.

Apart from market challenges, Xiaomi India has also faced a cash crunch due to the Enforcement Directorate (ED) seizing over Rs 5,500 crore of its bank assets, alleging illegal remittance of money abroad. Xiaomi is currently contesting these accusations and seizures in court. Despite these setbacks, the company reported a 9% growth in revenue to Rs 39,099 crore in the 2021-22 financial year.

Xiaomi India

Xiaomi India, which entered the Indian market in 2014 and quickly rose to become the top-ranked smartphone brand, has faced increasing scrutiny from the Indian government, following the trend seen with other Chinese companies.

The Indian government has been taking measures to scrutinize and regulate the operations of Chinese companies due to various concerns, including data security, national security, and trade imbalances. These concerns have become more pronounced in recent times, leading to increased scrutiny and stricter regulations imposed on Chinese companies operating in India.

One of the main issues raised by the Indian government is data security. There have been concerns about Chinese companies, including Xiaomi, allegedly collecting and storing user data without proper consent or in violation of Indian data protection laws. Such concerns have prompted the government to implement stricter regulations and review the operations of Chinese companies to ensure compliance with data privacy and security standards.

Additionally, geopolitical tensions between India and China have also played a role in the increased scrutiny. The border disputes between the two countries and geopolitical rivalries have led to a sentiment of distrust towards Chinese companies in India. As a result, the Indian government has been more vigilant in monitoring the activities of Chinese companies, including Xiaomi, to safeguard national interests.

These factors have contributed to the intensified scrutiny faced by Xiaomi and other Chinese companies in India. The government’s actions include increased regulatory requirements, audits, and investigations into their operations. This scrutiny has impacted the business environment for Xiaomi and has likely influenced the company’s decision-making processes and organizational restructuring in response to the evolving regulatory landscape.

It is important to note that the scrutiny and regulatory measures are not exclusive to Xiaomi but extend to various Chinese companies operating in India across different sectors. The Indian government aims to ensure compliance, protect national interests, and maintain a secure business environment in the country.

The departure of former India head Manu Kumar Jain in June 2021 was followed by Alvin Tse, the former Xiaomi Indonesia head, taking over as the general manager. Muralikrishnan B was subsequently elevated to the position of president of India operations. Sources claim that key team leads now report directly to Tse, who participates in decision-making through the business management committee (BMC) after discussions with the headquarters. The company downplays the transfer of decision-making power, highlighting the joint decision-making process involving Indian and global leaders.

The recent layoffs and internal restructuring are occurring against the backdrop of the ongoing ED case. Xiaomi’s lawyers have cited a cash crunch and requested an interim order allowing the company to use its bank accounts for day-to-day expenses while fighting the legal battle.

The Last Bit, Xiaomi India is taking proactive measures to address market challenges and streamline its operations in the face of declining market share, increased government scrutiny, and financial constraints. The reduction in headcount and restructuring efforts reflect the company’s efforts to adapt to the changing landscape. Despite these challenges, Xiaomi India remains committed to its operations in the country and aims to navigate the market effectively.